US TSYS LATE 2-WAY SQUARING, TSY YLDS NEAR 10M LOW, 10Y 2.056%

By Bill Sokolis

     CHICAGO (MNI) - 

US TSYS SUMMARY

Tsys finish mildly higher Friday, lower half modest range, decent two-way

positioning ahead of weekend, light deal-tied flow. Heavy short end Eurodlr

buying, Block facilitation, option related hedging while Dec rate hike

probability drops to around 20%. Equities weaker (emini -6.50, 2458.25) gold

lower (-1.33, 1347.96), oil weaker but off lows (WTI -1.50, 47.59).

- Tsys opened firmer, trailing firmer EGBs following ECB QE-taper chatter

overnight -  ECB member, Liikanen said ECB decisions could be taken in Dec. 

- Despite the midday dip in Tsys, underlying safe haven buying continues.

Geopolitical tensions w/N Korea remain taut (National Day holiday in N Korea

tomorrow, show of military force anticipated -- US and ally react undecided);

Hurricane Irma expected to make landfall in Florida late Saturday while Houston

continues to pick up the pieces from Hurricane Harvey.

- Sources reported decent two-way positioning ahead of weekend, light deal-tied

flow after some $55B priced between Tue-Thu. Limited react to second-tier data,

July wholesale inv +0.6% vs +0.4% in the advance estimate. Philly Fed Harker did

not touch upon Mon/Pol, Fed Dudley confident expansion to continue above pace.

- TSY 3pm ET: 2Y 1.266%, 3Y 1.374%, 5Y 1.640%, 7Y 1.885%, 10Y 2.058%, 30Y 2.678%

US TSY FUTURES CLOSE

Mildly higher after the bell, lower half of modest range, decent two-way

positioning ahead of weekend, light deal-tied flow. Geopolitical tensions w/N

Korea remain taut (National Day holiday in N Korea tomorrow, show of military

force anticipated -- US and ally react undecided); Hurricane Irma expected to

make landfall in Florida late Saturday while Houston continues to pick up the

pieces from Hurricane Harvey. Current futures levels:

* Dec Ultra bonds up 2/32 at 170-20 (170-01L/171-27H)

* Dec 30-yr Bond futures up 2/32 at 157-14 (157-01L/158-09H)

* Dec 10-yr futures up 1/32 at 127-17.5 (127-12.5L/127-28.5H)

* Dec 5-yr futures up .25/32 at 118-27.25 (118-24.5L/119-01.5H)

* Dec 2-yr futures up .5/32 at 108-09 (108-07.75L/108-10H)

US EURODLR FUTURES CLOSE

Mildly higher after the bell, Greens (Sep19-Jun20) lagging, heavy buying in

short end Sep'17 and Dec'17 futures, Block facilitation, option related hedging

while Dec rate hike probability drops to around 20%. Current White pack

(Sep'17-Jun'18):

* Sep'17 +0.015 at 98.700

* Dec'17 +0.015 at 98.630

* Mar'18 +0.015 at 98.575

* Jun'18 +0.015 at 98.535

* Red pack (Sep'18-Jun'19) +0.010-0.015

* Green pack (Sep'19-Jun'20) 0.005

* Blue pack (Sep'20-Jun'21) +0.010-0.005

* Gold pack (Sep'21-Jun'22) +0.010-0.020

US SWAPS

Spreads running mildly tighter by the close, narrow range w/long end reversing

early wides; light deal-tied volume and two-way squaring going into weekend. OTC

and exchange traded option vol lower but off lows late, decent volume in latter

w/ongoing Dec midurve unwinds late. Latest spread levels:

* 2Y -0.38/23.62

* 5Y -0.38/8.19

* 10Y -0.19/-3.94

* 30Y -0.06/-34.56

US OUTLOOK

Data/speaker calendar (prior, estimate):

- Sep 11 Sep NY Fed expectations survey 1100ET

- Sep 11 US Tsy $39.0B 13-Week Bill auction 1130ET

- Sep 11 US Tsy $33.0B 26-Week Bill auction 1130ET

- Sep 11 US Tsy $24.0B 3-Year Note auction 1300ET

Eurodollar/Treasury option summary

Eurodollar options, 

Blocks:

0306ET

  6k EOM 88c, 4.5

  5k 2M 88c, 5.5

0836ET

  10k EOZ 87p, 1.5

0938ET, more in pit

  10k EOZ 82p, 4.0

Pit/screen:

-35k EDM 78/81/78 2x1x1p trees, 3.5

+25k EDH 90c, 0.5

10k EDF 82/83 3x2p spds, 1.5

5k EDZ 87/88/90c flys, 0.5

+5k EDZ 85/87 R/R, 1.0+p

+4k EDZ/EDH 87/88/90c fly strip, 1.0

-3k EDZ 83/85/86p flys, 2.5

+5k EDU'18 80/83p spds, 8.0

+4k EDZ 83/85p spds, 1.5

+3.5k EDZ 83/85 2x1p spds, 1.25

-2k EDU18 85 straddles, 29.0

-66k EOZ 81/82p spds, 4.5 vs.

  +22k EOZ 83c, 11.0 vs. 98.405

+40k EOZ 85c vs. 

  EOZ 81/82p spds, 3.5-4.5 net

+10k EOZ 82p

+10k EOZ 85p, 4.0 also Blck'd

7k EOZ 80/81/82p flys, 1.5

6.5k EOZ 81/82/83p flys, 2.0

-6k EOF 77/80p spds, 1.0 vs.

  +E3F 73/76c spds, 2.0, 1.0 net db

5k EOZ 82/83c strip vs.

  10k EDZ 85c, 4.5 net

+5k EOZ 81/82p spds vs.

  EOZ 86/87c spd spds, 1.0

+3k EOZ 80/82p spds, 3.5 vs. 98.395/0.33%

2k EOH 80/81p spds, 2.5

2k EOZ 85/86 1x2c spds vs. EOZ 82p, 3.0

12k E2Z 77p, 1.5 vs. 98.25/0.10%

10k E3F 76/81p spds, 15.5 vs. 98.085/0.38%

Tsy options

Pit/screen:

+20k TYX 128/130c spds, 30-32

+10k TYX 128/130 1x2c spd, 20

-6k TYV127+/129 1x2c spds, 20

5k TYV 126/127p spds vs.

  TYV 127+/128c spd, 0.0

5k TYZ 123p, 4

3.5k TYV 128/129 1x2cspd, 5

2k TYX 128/128+ 1x2c spd, 15

2k TYX 127p, 36

1k TYV 126/127/127+p flys, 3

3.5k wk3 TY 127+/128+/129+c flys, 12

2k TYX 128+/130c spd, 19

+5k USX 155p, 52

--MNI Chicago Bureau; tel: +1 312-431-0089; email: bill.sokolis@marketnews.com

[TOPICS: MTABLE]